CC Amatil weighs up capital options

Coca-Cola Amatil may now consider giving something back to shareholders in the form of a capital return or share buyback as it runs short of sizeable acquisition targets, having missed out on acquiring the Berri juice business.

Though CC Amatil boss Terry Davis wants to keep expanding the business in the water, fruit juice and flavoured milk markets, the Australian Competition and Consumer Commission decision last November to knock back a proposed $400 million takeover of Doug Shears's Berri has put growth through large acquisition on hold, according to some observers.

"It seems the ACCC is concerned about (Amatil) using its distribution network to push other products, so they may have to grow through smaller acquisitions or develop their own brands," said one fund manager.

The acquisition would have given CC Amatil about 50 per cent of the $800 million juice market in addition to its 65 per cent share of the fizzy drink trade and 3 per cent of the packaged water market.

Although CC Amatil is believed to be interested in smaller "bolt-on" acquisitions in the juice sector in the short term, some analysts said capital management might become an issue down the track.

A recent Merrill Lynch report suggested that the Berri decision meant "near-term acquisitions of size are off the agenda".

With CC Amatil generating strong free cash flow, and gearing forecast to drop to a relatively low 42 per cent in 2005, the broker describes the group's balance sheet as "underutilised".

"In our view (Amatil) could consider some form of capital management in the absence of acquisitions," Merrill noted.

CC Amatil shares have risen 14 per cent since September, helped by the rising dollar. They closed on Friday up 1¢ at $6.48.